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Teen Trades up on Craigslist from Phone to Porsche in 2 Years

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Re: Teen Trades up on Craigslist from Phone to Porsche in 2 Years

#31

Post by dpatru »

jacoblyles wrote: post #18
dpatru wrote: post #17

One of the points that Charlie Munger makes in his talk on worldly wisdom ( http://ycombinator.com/munger.html ) is that good investors tend to bet heavily when the odds are grossly in their favor and not bet at all the rest of the time. The teen in this story illustrates how consistent application of this principle yields good results. This is also how Paul Graham operates YCombinator: he carefully evaluates all the…

YCombinator's strategy is better described by Nassim Taleb's "Extremistan" parable. In Extremistan, most of your gains from stock investing happen from the few investments that make you a lot of money. So it's wise to distribute your investments over a large number of small investments, counting on the fact that your winners cover your expenses for your losers. This is the opposite of the small number of large invest…

Relative to the amount of opportunity it has, YC is very selective. According to Business Week, YC's acceptance rate is 4.4% (1). For comparison, Harvard's rate is 6.9% (2).

I'm just realizing that besides launching early, working hard, iterating rapidly, listening to your customers, persevering, etc, a big part of success in business seems to be selection: having the discipline and patience to pick the best deals. Deals can involve physical trades (as in the posted article), investments, customers, or even tasks to do. Whatever your process is, a good way to make your outputs above average is to select above-average inputs.

It seems obvious that the way to trade up from a phone to a Porsche is to carefully select your trades. It's not so obvious, at least to me, that the way to run a very profitable YCombinator is to carefully select your founders. Simple selection may be more important than locating in Silicon Valley, having regular dinners with great speakers, offering legal and technical help, and introducing investors. When you start off with great entrepreneurs it's not so hard to make them even better.

I'm naturally a believer in transformation. * If the trade as advertised is not a good deal, let's negotiate and we'll make it work. * If a person is not a good entrepreneur, that can be fixed with the right training program and environment. * If the product is not right for this customer, we'll add features and cut the price until it is right. * If a person has the wrong political beliefs, what is needed is some good logical argument.

This sometimes works, but it is often more efficient to simply look for a better deal: Find someone with a better trade; find someone who's more entrepreneurial, find a customer with more of a need, find a voter who already agrees with you.

1. http://www.businessweek.com/smallbiz/content/sep2007/sb20070.... 2. http://www.thecrimson.com/article/2010/3/31/financial-aid-pe...

Re: Teen Trades up on Craigslist from Phone to Porsche in 2 Years

#32

Post by SkyMarshal »

eru wrote: post #26
SkyMarshal wrote: post #15

Earlier quoted context omitted.

Not exactly. Arbitrage is exploiting mispricings of the same item in different markets. For example, say you buy an iPhone from Craigslist for $100, then turn around and sell it on Ebay for $150, netting you $50. Or conversely, you get an iPhone for your birthday for free, sell it on Ebay for $150, then buy a second one from Craigslist for $100, netting you an iPhone+$50. That's arbitrage. It sounds like makeramen's…

> Arbitrage is exploiting mispricings of the same item in different markets. There seem to be narrower and wider definitions of arbitrage. Some narrow definitions require arbitrage to be risk-free. Some wider definition accommodate things like statistical arbitrage ( http://en.wikipedia.org/wiki/Statistical_arbitrage ), which is far from certain and doesn't even use the same items, but just items with correlated pric…

True. A broader definition is probably 'exploiting price differentials of correlated assets'.

Market is irrelevant, and both 'same item' and 'different but correlated items' are both subsets. And 'mispricing' presumes there's a true value, which may or may not be case.

Re: Teen Trades up on Craigslist from Phone to Porsche in 2 Years

#33

Post by SkyMarshal »

sigstoat wrote: post #24
SkyMarshal wrote: post #15

Earlier quoted context omitted.

Not exactly. Arbitrage is exploiting mispricings of the same item in different markets. For example, say you buy an iPhone from Craigslist for $100, then turn around and sell it on Ebay for $150, netting you $50. Or conversely, you get an iPhone for your birthday for free, sell it on Ebay for $150, then buy a second one from Craigslist for $100, netting you an iPhone+$50. That's arbitrage. It sounds like makeramen's…

depends on what you consider to be the market(s). the north and south sides of the playground might have rather different valuations of a card. if you can realize that and safely transport your goods that distance, you've got an opportunity.

I guess that when I think of kids trading cards like Pokemon or Baseball cards, I envision kids from different social strata all religiously reading the Pokemon websites and having a similar idea of the value of the cards.

But having done no card trading of any kind myself, I wouldn't really know, that's just an assumption based on a few observations and anecdotal evidence.

Re: Teen Trades up on Craigslist from Phone to Porsche in 2 Years

#34

Post by dpatru »

vannevar wrote: post #21
dpatru wrote: post #17

One of the points that Charlie Munger makes in his talk on worldly wisdom ( http://ycombinator.com/munger.html ) is that good investors tend to bet heavily when the odds are grossly in their favor and not bet at all the rest of the time. The teen in this story illustrates how consistent application of this principle yields good results. This is also how Paul Graham operates YCombinator: he carefully evaluates all the…

At this point in his career, the fact that PG is investing in them is by far the single most valuable thing about any of his startups, much more valuable than their respective business models. The businesses succeed because he invests, he doesn't invest because they succeed. That doesn't mean any business model can succeed with funding, only that once you're funded you've got a lot more flexibility to adapt your busi…

I think YC is on a virtuous spiral. A YC investment increases a candidate's chances of success. This attracts a lot of candidates which enables YC to select the ones that have the greatest chance of succeeding. Which further improves YC's record.

Harvard is in a similar situation. A Harvard graduate is impressive because the students selected by Harvard are impressive because a lot of students want to be Harvard graduates. This is why elite schools can give away their curriculum on the Internet. If the content of the curriculum were critical, then top schools would guard it more closely. However, if the best students are already attending, then top schools don't have much to fear from the left-behinds who follow along for free on the Internet.

This is an example of something you can't copy. As long as the best high school graduates keep choosing Harvard, Harvard has little to fear from a competitor who meticulously copies its fine classrooms, libraries, and curriculum. Similarly, as long as the best entrepreneurs choose YC, YC would still do well even if all of its dinners were broadcast free on justin.tv.

Re: Teen Trades up on Craigslist from Phone to Porsche in 2 Years

#35

Post by hristov »

zokier wrote: post #8
noelchurchill wrote: post #4

He spends five to six hours a day on his i-Phone scouring the website for good deals.

That sounds kinda crazy. 5-6 hours daily for two years could have easily earned him money to buy a Porsche, for cold cash.

Yeah, but he probably likes doing the ebay thing, and would probably hate any job he can get as a teenager.

He should probably be able to start a good career as a professional pawn shop or antiques dealer.

Re: Teen Trades up on Craigslist from Phone to Porsche in 2 Years

#36

Post by blizkreeg »

eru wrote: post #30
jaytee_clone wrote: post #20

Five hours a day at $10/hr for two years could have earned him $30,000 (5x10x600, i'm sure he was bartering during weekends too) His car only worths $15,000.

The article estimates his current car (the Porsche) to be worth $9,000. (By the way, I always thought a Porsche would cost more, even used. Hey, I may get myself one for this price.) We also don't know what other trades he has made during this time. Judging by the description in the article, he seems to be quite prolific, and has probably also made some money with refurbishing electric gadgets and so on. And we also…

Porsche's seem to depreciate in price pretty rapidly. I was surprised to find that my used 98 Boxster is now worth only 9k. Bad investment, these cars. And I bought mine used for less than the price of a new Accord. But fun rides!

Re: Teen Trades up on Craigslist from Phone to Porsche in 2 Years

#37

Post by maukdaddy »

SkyMarshal wrote: post #15
lkozma wrote: post #12

Earlier quoted context omitted.

Is that what is called arbitrage ?

Not exactly. Arbitrage is exploiting mispricings of the same item in different markets. For example, say you buy an iPhone from Craigslist for $100, then turn around and sell it on Ebay for $150, netting you $50. Or conversely, you get an iPhone for your birthday for free, sell it on Ebay for $150, then buy a second one from Craigslist for $100, netting you an iPhone+$50. That's arbitrage. It sounds like makeramen's…

True arbitrage has to be riskless.

Re: Teen Trades up on Craigslist from Phone to Porsche in 2 Years

#39

Post by philwelch »

dpatru wrote: post #31
jacoblyles wrote: post #18

Earlier quoted context omitted.

YCombinator's strategy is better described by Nassim Taleb's "Extremistan" parable. In Extremistan, most of your gains from stock investing happen from the few investments that make you a lot of money. So it's wise to distribute your investments over a large number of small investments, counting on the fact that your winners cover your expenses for your losers. This is the opposite of the small number of large invest…

Relative to the amount of opportunity it has, YC is very selective. According to Business Week, YC's acceptance rate is 4.4% (1). For comparison, Harvard's rate is 6.9% (2). I'm just realizing that besides launching early, working hard, iterating rapidly, listening to your customers, persevering, etc, a big part of success in business seems to be selection : having the discipline and patience to pick the best deals.…

That's more a result of YC's popularity and limited capacity than any desire to be selective. A VC who dicks around with you for months on end and only makes 5 investments a year is selective--YC is just popular.

Re: Teen Trades up on Craigslist from Phone to Porsche in 2 Years

#40

Post by philwelch »

InclinedPlane wrote: post #7
johnnyg wrote: post #3

It was alarming to read that people tell him he is a con artist. He's a good businessman.

He's a businessman, but whether or not he's good is a question for debate. Most people working the same hours have a higher income. Do the math, if the Porsche trade represents all of his "income" from bartering he made $3.6 an hour, if it represents half of his income then he made minimum wage. It's interesting, and somewhat novel, but hardly astounding or terribly impressive.

He started with a phone and ended up with a Porsche. OK, maybe he's not Richard Branson or something, but he gets results.
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